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What is observation (within a healthcare setting)?

Observation within a healthcare setting refers to when a patient is staying at a healthcare facility but is not under the direct care of a healthcare provider. If a patient is under the direct care of a provider, that patient is referred to as admitted.

Whether a patient is classified as under observation or admitted has to do with the extent of care that is required. Usually, patients are put under observation if the extent of their care requirements is not immediately clear. While under observation, a patient may be admitted if more care is needed or discharged if no further care is needed.

Observation status also allows patients to remain in the care facility following a medical event or procedure. For example, an admitted patient may become classified as under observation following surgery.

Why is observation important in healthcare?

Differentiating between being under observation and being admitted is important in managing resources. Being classified as under observation allows patients to stay at the facility in case care is needed, but without unnecessarily taking up the time and resources of healthcare providers.  

Understanding what is means to be under observation is also important from a health insurance perspective. Many plans bill differently for being under observation versus being admitted, especially in the form of deductibles and copays. When patients understand the difference between the two, the potential for unwanted billing surprises is reduced.